Accounting Research Manager® Weekly Summary of
Developments
ARM Weekly Summary February 24-28, 2014
ARM Weekly Summary February 24-28, 2014
Accounting and
SEC Headlines
Income Taxes -- Accounting for Income Taxes Interpretation Updated
SEC Speeches -- SEC Chair and Commissioners Remarks
Audit Committees -- SEC Chief Accountant Stresses the Important Role of Audit Committees
Asset-Backed Securities -- SEC Re-Opens Comment Period on Releases
Financial Instruments -- FASB Discusses Financial Instruments and Other Matters
Rate-Regulated Activities -- IASB Discusses Rate-Regulated Activities and Other Matters
Auditing and Internal Controls Headlines
Dealerships -- New Knowledge-Based Audits, Compilations, and Reviews of Dealerships Published
Using the Work of Internal Auditors -- AICPA Issues Clarified SAS 128
Audit Documentation -- Additional Interpretive Guidance Discussed
Government Headlines
Data Collection Form -- Aspects of New Form Discussed
Income Taxes -- Accounting for Income Taxes Interpretation Updated
SEC Speeches -- SEC Chair and Commissioners Remarks
Audit Committees -- SEC Chief Accountant Stresses the Important Role of Audit Committees
Asset-Backed Securities -- SEC Re-Opens Comment Period on Releases
Financial Instruments -- FASB Discusses Financial Instruments and Other Matters
Rate-Regulated Activities -- IASB Discusses Rate-Regulated Activities and Other Matters
Auditing and Internal Controls Headlines
Dealerships -- New Knowledge-Based Audits, Compilations, and Reviews of Dealerships Published
Using the Work of Internal Auditors -- AICPA Issues Clarified SAS 128
Audit Documentation -- Additional Interpretive Guidance Discussed
Government Headlines
Data Collection Form -- Aspects of New Form Discussed
To
read the full content, request a trial
=============================
ACCOUNTING AND SEC HEADLINES:
=============================
Income Taxes -- Accounting for Income Taxes Interpretation Updated
We have updated our publication, Accounting for Income Taxes — Interpretations of U.S. GAAP, to reflect certain clarifying language to the existing interpretation, 740-10-15-3.C, “Accounting for Investments in Non-Consolidated Tax-Advantaged Limited Partnerships (Such as Investments in Affordable Housing Projects).” We have also updated the Recent Developments section to reflect activities at the FASB and the IASB as they relate to income tax accounting.
See our Literature Update for complete details.
SEC Speeches -- SEC Chair and Commissioners Remarks
SEC Chair Mary Jo White, along with other SEC Commissioners, spoke at the “SEC Speaks” conference held in Washington, D.C. on February 21, 2014. The SEC has published the following speeches from this conference:
-Chairman’s Address at SEC Speaks 2014 by Chair Mary Jo White;
-Remarks at the “SEC Speaks” Conference by Commissioner Kara M. Stein;
-An Open Letter to the SEC Staff by Commissioner Daniel M. Gallagher; and
-Addressing Known Risks to Better Protect Investors by Commissioner Luis A. Aguilar.
Ms. White’s comments focused on the state of the SEC in 2014, including a discussion on critical initiatives or areas of focus. Among the items discussed by Chair White were:
-Staff in the Division of Corporation Finance (Corp Fin) will focus on making specific recommendations for updating the rules that govern public company disclosure. As part of this effort, Corp Fin will be broadly seeking input from companies and investors about how we can make our disclosure rules work better, and, specifically, investors will be asked what type of information they want, when do they want it and how companies can most meaningfully present that information.
-More enforcement cases are expected to require admissions of guilt in a broader range of cases, including those involving egregious conduct.
-The SEC will continue to engage with other domestic and international regulators to ensure that the systemic risks to our interconnected financial systems are identified and addressed.
-In addition to continuing to complete important rulemakings, the SEC will also intensify its consideration of the question of the role and duties of investment advisers and broker dealers, with the goal of enhancing investor protection.
In addition to Chair White, Commissioners Kara M. Stein, Daniel M. Gallagher, and Luis A. Aguilar spoke at the conference. Ms. Stein discussed a number of topics including the important role gatekeepers play in the securities markets. Ms. Stein noted that gatekeepers “fulfill a critical role in allowing participants to access the capital markets. As the Commission is being tasked with overseeing more, with fewer resources, the focus on gatekeepers is both an efficient and effective approach to policing the securities marketplace.”
Mr. Gallagher’s comments were directed towards the SEC staff and touched on a number of areas, including observations on how to return the SEC to the top of the best-places-to-work and carry out its mandate to protect investors.
Mr. Aguilar discussed ways the SEC could become a more effective regulator while also enhancing its protection of investors by more effectively addressing known risks. Topics discussed by Mr. Aguilar included: (a) growing cyber-threats to registrants, the capital markets, and investors; (b) revisiting the role and regulation of transfer agents; and (c) transfer agents and technology.
Audit Committees -- SEC Chief Accountant Stresses the Important Role of Audit Committees
Paul A. Beswick, Chief Accountant of the SEC, spoke at the “SEC Speaks” conference held in Washington, D.C. Mr. Beswick’s prepared presentation focused on the importance of audit committees. Mr. Beswick reminded conference participants of the unique position audit committees are in to represent investors and play an important role in promoting high-quality, transparent financial reporting to investors. Topics discussed by Mr. Beswick include:
-The role of the audit committee;
-Responsibilities of the audit committee, including those related to independence, monitoring, and oversight; and
-Key items for audit committees to consider, including the need to think critically about company disclosures about the committees’ role and responsibilities.
Asset-Backed Securities -- SEC Re-Opens Comment Period on Releases
The SEC is re-opening the comment period on the following two proposed releases:
-Asset-Backed Securities (originally proposed in 2010); and
-Re-Proposal of Shelf Eligibility Conditions for Asset-Backed Securities (originally proposed in 2011).
According to the SEC, it is re-opening the comment period to permit interested persons to comment on an approach for the dissemination of potentially sensitive asset-level data. This approach is discussed in a staff memorandum included in the public comment file.
Comments on these re-proposed rules are due Friday, March 28, 2014.
Financial Instruments -- FASB Discusses Financial Instruments and Other Matters
As reported in its "Summary of Board Decisions" publication, the FASB met on February 26, 2014, and reached the following conclusions:
-The February 2013 proposed ASU, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The FASB tentatively decided not to include the characteristics of the instrument criterion in the classification and measurement model for financial instruments and to require equity investments to be measured at fair value through income. The FASB also tentatively decided to extend the fair value option to hybrid financial assets.
-The proposed guidance for development stage entities, discussing feedback received on its November 2013 proposed ASU, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. The FASB decided to remove the development stage entity guidance and amend Topic 275, Risks and Uncertainties, to clarify that an entity that has not begun operations should provide risk and uncertainty disclosures. The FASB also tentatively decided to eliminate Topic 810, Consolidation, paragraph 810-10-15-16, which provides guidance for assessing whether a development stage entity is a variable interest entity.
-Not-for-profit financial reporting, including: (a) formatting alternatives for the statement of activities and changes in net assets; and (b) presentation and disclosure of investment expenses. The FASB tentatively decided that the financial statement presentation should be flexible and allow presentation alternatives. The FASB also discussed the presentation and disclosure of investment expenses but reached no tentative conclusions.
Rate-Regulated Activities -- IASB Discusses Rate-Regulated Activities and Other Matters
As reported in its "IASB Update" publication, the IASB met on February 19-20, 2014, and discussed the following topics:
-Rate-regulated activities: research project;
-Narrow-scope amendments—IFRS 2, Share-based Payment;
-Sale or contribution of assets between an Investor and its associate or joint venture (amendments to IFRS 10 and IAS 28);
-Agriculture: bearer plants;
-IFRIC Update;
-Equity Method: Share of Other Net Assets Changes;
-Financial Instruments: Impairment;
-Financial Instruments: Classification and Measurement; and
-Fair Value Measurement: Unit of Account.
=======================================
AUDITING AND INTERNAL CONTROLS HEADLINES:
=======================================
Dealerships -- New Knowledge-Based Audits, Compilations, and Reviews of Dealerships Published
We have published the 2014 edition of Knowledge-Based Audits, Compilations, and Reviews of Dealerships. The primary objective of this toolset is to provide practitioners with an effective approach for conducting high quality audits, compilations, and reviews of dealership entities. This publication is applicable for all types of dealership entities, including vehicle and equipment dealers. This publication reflects comprehensive coverage of current authoritative literature following pronouncements through AICPA Statement on Auditing Standards (SAS) No. 128, Using the Work of Internal Auditors; and FASB Accounting Standards Update (ASU) No. 2013-08, Investment Companies.
See our Literature Update for complete details.
Using the Work of Internal Auditors -- AICPA Issues Clarified SAS 128
The Auditing Standards Board (ASB) of the AICPA has issued its SAS No. 128, Using the Work of Internal Auditors. SAS 128 represents the revision of extant AU-C Section 610, The Auditor's Consideration of the Internal Audit Function in an Audit of Financial Statements, to apply the ASB’s clarity drafting conventions and to converge with International Standards on Auditing (ISAs) 610 (Rev. 2013), Using the Work of Internal Auditors.
SAS 128 addresses the responsibilities of external auditors when using work of the internal audit function to provide audit evidence, including direct assistance under the direction, supervision and control of the external auditor for purposes of the audit.
Consistent with ISA 610 (Revised 2013), SAS 128 introduces the concept of a systematic and disciplined approach. SAS 128 requires, among other things, as a prerequisite to being able to use the work of the internal audit function, that the external auditor evaluate the application by the internal audit function of a systematic and disciplined approach, including quality control. This new requirement represents an additional and explicit evaluation which the external auditor will need to perform and document in order to adequately conclude on the appropriateness of using the work of the internal audit function as audit evidence. SAS 128 is effective for audits of financial statements for periods ending on or after December 15, 2014.
SAS 128 supersedes SAS No. 65, The Auditor's Consideration of the Internal Audit Function in an Audit of Financial Statements (AICPA, Professional Standards, AU sec. 322 and AU-C sec. 610, Using the Work of Internal Auditors). Conforming amendments were made to other sections, including SAS No. 122, Statements on Auditing Standards: Clarification and Recodification, section 315, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement (AICPA, Professional Standards, AU-C sec. 315); Statement on Quality Control Standards No. 8, A Firm’s System of Quality Control (Redrafted) (AICPA, Professional Standards, QC sec. 10); and others.
Audit Documentation -- Additional Interpretive Guidance Discussed
We have added a GAAS Update Service that focuses on practical issues relating to AU-C Section 230, Audit Documentation, by using a “Question & Answer” (Q&A) format designed to provide practical discussion, advice, and specific implementation guidance. The Q&As address various issues including:
-Common audit documentation deficiencies that the auditor should be aware of;
-Documentation of significant findings or issues arising during the audit, including the conclusions reached thereon and the significant professional judgments made in reaching those conclusions; and
-Specific items that should be included in the audit documentation when certain matters arise after the date of the auditor’s report that cause the auditor to perform new or additional audit procedures or reach new conclusions.
======================
GOVERNMENT HEADLINES:
======================
Data Collection Form -- Aspects of New Form Discussed
We have added a Governmental GAAP Update Service that discusses the federal audit clearinghouse (FAC) changes to the 2013 Data Collection Form (DCF). The DCF is part of the reporting package of the single audit, including:
-Auditor’s reports;
-Schedule of expenditures of federal awards;
-Notes to the schedule of expenditures of federal awards;
-Schedule of findings and questioned costs;
-Audit findings (and potentially management’s responses); and
-DCF.
To read the full content, request a trial
=============================
ACCOUNTING AND SEC HEADLINES:
=============================
Income Taxes -- Accounting for Income Taxes Interpretation Updated
We have updated our publication, Accounting for Income Taxes — Interpretations of U.S. GAAP, to reflect certain clarifying language to the existing interpretation, 740-10-15-3.C, “Accounting for Investments in Non-Consolidated Tax-Advantaged Limited Partnerships (Such as Investments in Affordable Housing Projects).” We have also updated the Recent Developments section to reflect activities at the FASB and the IASB as they relate to income tax accounting.
See our Literature Update for complete details.
SEC Speeches -- SEC Chair and Commissioners Remarks
SEC Chair Mary Jo White, along with other SEC Commissioners, spoke at the “SEC Speaks” conference held in Washington, D.C. on February 21, 2014. The SEC has published the following speeches from this conference:
-Chairman’s Address at SEC Speaks 2014 by Chair Mary Jo White;
-Remarks at the “SEC Speaks” Conference by Commissioner Kara M. Stein;
-An Open Letter to the SEC Staff by Commissioner Daniel M. Gallagher; and
-Addressing Known Risks to Better Protect Investors by Commissioner Luis A. Aguilar.
Ms. White’s comments focused on the state of the SEC in 2014, including a discussion on critical initiatives or areas of focus. Among the items discussed by Chair White were:
-Staff in the Division of Corporation Finance (Corp Fin) will focus on making specific recommendations for updating the rules that govern public company disclosure. As part of this effort, Corp Fin will be broadly seeking input from companies and investors about how we can make our disclosure rules work better, and, specifically, investors will be asked what type of information they want, when do they want it and how companies can most meaningfully present that information.
-More enforcement cases are expected to require admissions of guilt in a broader range of cases, including those involving egregious conduct.
-The SEC will continue to engage with other domestic and international regulators to ensure that the systemic risks to our interconnected financial systems are identified and addressed.
-In addition to continuing to complete important rulemakings, the SEC will also intensify its consideration of the question of the role and duties of investment advisers and broker dealers, with the goal of enhancing investor protection.
In addition to Chair White, Commissioners Kara M. Stein, Daniel M. Gallagher, and Luis A. Aguilar spoke at the conference. Ms. Stein discussed a number of topics including the important role gatekeepers play in the securities markets. Ms. Stein noted that gatekeepers “fulfill a critical role in allowing participants to access the capital markets. As the Commission is being tasked with overseeing more, with fewer resources, the focus on gatekeepers is both an efficient and effective approach to policing the securities marketplace.”
Mr. Gallagher’s comments were directed towards the SEC staff and touched on a number of areas, including observations on how to return the SEC to the top of the best-places-to-work and carry out its mandate to protect investors.
Mr. Aguilar discussed ways the SEC could become a more effective regulator while also enhancing its protection of investors by more effectively addressing known risks. Topics discussed by Mr. Aguilar included: (a) growing cyber-threats to registrants, the capital markets, and investors; (b) revisiting the role and regulation of transfer agents; and (c) transfer agents and technology.
Audit Committees -- SEC Chief Accountant Stresses the Important Role of Audit Committees
Paul A. Beswick, Chief Accountant of the SEC, spoke at the “SEC Speaks” conference held in Washington, D.C. Mr. Beswick’s prepared presentation focused on the importance of audit committees. Mr. Beswick reminded conference participants of the unique position audit committees are in to represent investors and play an important role in promoting high-quality, transparent financial reporting to investors. Topics discussed by Mr. Beswick include:
-The role of the audit committee;
-Responsibilities of the audit committee, including those related to independence, monitoring, and oversight; and
-Key items for audit committees to consider, including the need to think critically about company disclosures about the committees’ role and responsibilities.
Asset-Backed Securities -- SEC Re-Opens Comment Period on Releases
The SEC is re-opening the comment period on the following two proposed releases:
-Asset-Backed Securities (originally proposed in 2010); and
-Re-Proposal of Shelf Eligibility Conditions for Asset-Backed Securities (originally proposed in 2011).
According to the SEC, it is re-opening the comment period to permit interested persons to comment on an approach for the dissemination of potentially sensitive asset-level data. This approach is discussed in a staff memorandum included in the public comment file.
Comments on these re-proposed rules are due Friday, March 28, 2014.
Financial Instruments -- FASB Discusses Financial Instruments and Other Matters
As reported in its "Summary of Board Decisions" publication, the FASB met on February 26, 2014, and reached the following conclusions:
-The February 2013 proposed ASU, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The FASB tentatively decided not to include the characteristics of the instrument criterion in the classification and measurement model for financial instruments and to require equity investments to be measured at fair value through income. The FASB also tentatively decided to extend the fair value option to hybrid financial assets.
-The proposed guidance for development stage entities, discussing feedback received on its November 2013 proposed ASU, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. The FASB decided to remove the development stage entity guidance and amend Topic 275, Risks and Uncertainties, to clarify that an entity that has not begun operations should provide risk and uncertainty disclosures. The FASB also tentatively decided to eliminate Topic 810, Consolidation, paragraph 810-10-15-16, which provides guidance for assessing whether a development stage entity is a variable interest entity.
-Not-for-profit financial reporting, including: (a) formatting alternatives for the statement of activities and changes in net assets; and (b) presentation and disclosure of investment expenses. The FASB tentatively decided that the financial statement presentation should be flexible and allow presentation alternatives. The FASB also discussed the presentation and disclosure of investment expenses but reached no tentative conclusions.
Rate-Regulated Activities -- IASB Discusses Rate-Regulated Activities and Other Matters
As reported in its "IASB Update" publication, the IASB met on February 19-20, 2014, and discussed the following topics:
-Rate-regulated activities: research project;
-Narrow-scope amendments—IFRS 2, Share-based Payment;
-Sale or contribution of assets between an Investor and its associate or joint venture (amendments to IFRS 10 and IAS 28);
-Agriculture: bearer plants;
-IFRIC Update;
-Equity Method: Share of Other Net Assets Changes;
-Financial Instruments: Impairment;
-Financial Instruments: Classification and Measurement; and
-Fair Value Measurement: Unit of Account.
=======================================
AUDITING AND INTERNAL CONTROLS HEADLINES:
=======================================
Dealerships -- New Knowledge-Based Audits, Compilations, and Reviews of Dealerships Published
We have published the 2014 edition of Knowledge-Based Audits, Compilations, and Reviews of Dealerships. The primary objective of this toolset is to provide practitioners with an effective approach for conducting high quality audits, compilations, and reviews of dealership entities. This publication is applicable for all types of dealership entities, including vehicle and equipment dealers. This publication reflects comprehensive coverage of current authoritative literature following pronouncements through AICPA Statement on Auditing Standards (SAS) No. 128, Using the Work of Internal Auditors; and FASB Accounting Standards Update (ASU) No. 2013-08, Investment Companies.
See our Literature Update for complete details.
Using the Work of Internal Auditors -- AICPA Issues Clarified SAS 128
The Auditing Standards Board (ASB) of the AICPA has issued its SAS No. 128, Using the Work of Internal Auditors. SAS 128 represents the revision of extant AU-C Section 610, The Auditor's Consideration of the Internal Audit Function in an Audit of Financial Statements, to apply the ASB’s clarity drafting conventions and to converge with International Standards on Auditing (ISAs) 610 (Rev. 2013), Using the Work of Internal Auditors.
SAS 128 addresses the responsibilities of external auditors when using work of the internal audit function to provide audit evidence, including direct assistance under the direction, supervision and control of the external auditor for purposes of the audit.
Consistent with ISA 610 (Revised 2013), SAS 128 introduces the concept of a systematic and disciplined approach. SAS 128 requires, among other things, as a prerequisite to being able to use the work of the internal audit function, that the external auditor evaluate the application by the internal audit function of a systematic and disciplined approach, including quality control. This new requirement represents an additional and explicit evaluation which the external auditor will need to perform and document in order to adequately conclude on the appropriateness of using the work of the internal audit function as audit evidence. SAS 128 is effective for audits of financial statements for periods ending on or after December 15, 2014.
SAS 128 supersedes SAS No. 65, The Auditor's Consideration of the Internal Audit Function in an Audit of Financial Statements (AICPA, Professional Standards, AU sec. 322 and AU-C sec. 610, Using the Work of Internal Auditors). Conforming amendments were made to other sections, including SAS No. 122, Statements on Auditing Standards: Clarification and Recodification, section 315, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement (AICPA, Professional Standards, AU-C sec. 315); Statement on Quality Control Standards No. 8, A Firm’s System of Quality Control (Redrafted) (AICPA, Professional Standards, QC sec. 10); and others.
Audit Documentation -- Additional Interpretive Guidance Discussed
We have added a GAAS Update Service that focuses on practical issues relating to AU-C Section 230, Audit Documentation, by using a “Question & Answer” (Q&A) format designed to provide practical discussion, advice, and specific implementation guidance. The Q&As address various issues including:
-Common audit documentation deficiencies that the auditor should be aware of;
-Documentation of significant findings or issues arising during the audit, including the conclusions reached thereon and the significant professional judgments made in reaching those conclusions; and
-Specific items that should be included in the audit documentation when certain matters arise after the date of the auditor’s report that cause the auditor to perform new or additional audit procedures or reach new conclusions.
======================
GOVERNMENT HEADLINES:
======================
Data Collection Form -- Aspects of New Form Discussed
We have added a Governmental GAAP Update Service that discusses the federal audit clearinghouse (FAC) changes to the 2013 Data Collection Form (DCF). The DCF is part of the reporting package of the single audit, including:
-Auditor’s reports;
-Schedule of expenditures of federal awards;
-Notes to the schedule of expenditures of federal awards;
-Schedule of findings and questioned costs;
-Audit findings (and potentially management’s responses); and
-DCF.
To read the full content, request a trial
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